Bloomberg has a report on an IMF study. Here is the key sentence:
“The U.S. financial system remains fragile and banks subjected to additional economic stress might need as much as $76 billion in capital, according to the results of International Monetary Fund stress tests.”
We at CERF have been long concerned about the strength of our financial sector. In fact I suspect that the IMF study may be understating the severity of the situation. That would be a problem. Ask the Japanese what a weak banking sector can do to an economy. The weakness of their financial sector, and their failure to correct those weaknesses, were a significant contributor to their 20 years of economic malaise.
Failure to promptly deal with our weak financial sector can have similar consequences for us. You may think the new financial regulation fixes our banks. It doesn’t. It creates a new regulatory environment but it does nothing to address the problems that are keeping our banks from fully participating in our economy, inadequate capital and bad assets on their books.